How RBC Wealth Management supports increasingly international families with complex requirements
With the number of blended families rising and their heirs increasingly spread around the globe, determining the best way to organise their estate and support them can be perplexing. Families that cross numerous international boundaries and have complex family relationships must follow the legal and tax rules of their home country, as well as the countries where their family members live.
One example of cross-jurisdictional wealth planning involved family members and professional advisers in Switzerland, Costa Rica, Canada and the US.
Gerard Chinniah (pictured), Managing Director, Sales and Relationship Management with RBC Wealth Management in Jersey, says: “The family originally built its wealth in Switzerland. We worked with the son who had inherited the wealth, and significantly grew his inheritance through astute investing while living in Canada, before moving to Costa Rica. As he had a daughter in the US from his first marriage, his second marriage created a global blended family.
“When his health started deteriorating, he wanted to ensure his succession plan was put in place to fairly distribute his assets. He contacted us to discuss settling a trust with assets held with RBC Dominican Securities for the benefit of his daughter in New York. His plan was to leave his other assets to his second wife in Costa Rica.”
Chinniah coordinated the solution, which required settling the Canadian assets onto the trust for the daughter. “We had to involve legal and tax experts in the US, Costa Rica and Canada,” he says. “It was important to ensure we were compliant in each jurisdiction. We engaged a British law firm with offices across the US, Europe and Asia Pacific to coordinate the required advice across the jurisdictions.”
Chinniah adds: “The Costa Rican situation wasn’t atypical as most families need financial arrangements in several countries.” His office works with close to 1,000 global blended families.
It is common for families to send their children to a US college, after which many take up careers and residency in the US. In such cases, a US domestic trust can be set up, making the assets available to family members in different parts of the world. This is often necessary for blended families with offspring from different branches of the family in the US and elsewhere.
For estate planning, the older generation wants their wealth to be accessible to family members round the globe, but to keep the funds in their country of origin.
Chris McCallum (pictured left), Trust Specialist, Client and Business Development, with RBC Wealth Management in London, says: “If the money is transferred directly to the heirs, when the heir dies the funds would be subject to an estate tax – for example, an inheritance of $20m could be subject to an estate tax in excess of $3.5m.”
The trust structure is preferred for several reasons, particularly preserving assets. “A trust for adult offspring can be set up to control spending by heirs and avoid any issues with spendthrifts,” says McCallum.
Similarly, trusts can be used to direct assets to specific family members and protect them in a divorce. Assets in a trust can also provide protection from becoming part of an individual’s estate in the event of a bankruptcy. “Trusts work well as a planning technique for generational wealth transfer and for US residents for tax purposes,” says McCallum.
When family members are in multiple countries, McCallum adds, it often makes sense to establish multiple trusts. “You always want to separate out the US beneficiary and establish a domestic trust to meet US rules,” he says. “Establishing a separate foreign trust for non-US residents allows for greater flexibility in the types of investments you can make.”
McCallum says the countries with the most complicated rules for establishing trusts are the UK, Canada and the US. “No matter which countries are involved, we’re experienced in understanding each country’s rules,” says McCallum. “But we have all our clients engage legal advice and tax advice in their country and the country where they want to establish a trust.”
Managing the complexities of estate planning for blended families can be a challenge. When family members reside in a variety of countries, that extra layer of complication requires creative solutions while meeting each person’s needs.
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To learn more about how RBC Wealth Management can help you build a goal-based financial plan, contact us on:
Tel: +44 (0) 1534 501 111
Website: rbcwealthmanagement.com
• This advertising feature was first published in the July/August edition of Businesslife magazine